Average price of a new home hits 31-month high

Annual price growth was +3.4% in May, the highest increase for eight months. The traditional ‘spring bounce’ in buying activity, recent good weather and continued low base rate have all contributed to higher demand for new homes.

All major indices have shown a rise in average house prices in recent months. The general trend shows asking prices rising strongly and it is likely that this positive growth will be translated into further increases in the Land Registry and Nationwide Indices over the coming months.

The East and West Midlands saw the strongest price growth in May. Growth in the East Midlands has been driven by
the region’s major city, Nottingham, which recorded price rises of 7.8%. Overall the regional markets remain volatile,
and we expect this to remain the case for the foreseeable future as the current low rate of housebuilding ensures that
changes are calculated from a low base.

While the number of new homes coming to market is on an upward trend, there is concern in the industry over how long that can continue. Just 34,000 new home planning permissions were granted in Q1 2011, approximately half the level of five years ago. Increasing the volume of new homes built is now arguably the highest priority the industry faces, but
continued turmoil in the planning system is preventing developers from responding to market demand.

Commenting on the data, Steve Lees, Director of SmartNewHomes said:

“The significant rise in the average price of a new home is indicative of growing consumer demand during the peak
buying season. There are significant numbers of potential buyers who are looking for new homes and who are keen to
buy while they can still find excellent value for money. “The affordability of homes for first-time buyers remains a problem, though the industry is hopeful that the new ‘FirstBuy’ scheme will boost the new homes market when funding starts to be released this Summer.”

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